Mining Investment Law

The Mining Investment Law is one of a group of government regulations, specializing in regulating the mining sector in the Kingdom of Saudi Arabia. The Ministry of Industry and Mineral Resources is the entity responsible for implementing the provisions of the law and supervising its implementation. It includes: licensing provisions, achieving sustainability, providing financing, and monitoring and inspection provisions. It was issued by Royal Decree in 2004 before it was updated in 2020.

The new Mining Investment Law has been issued in sixty-three articles and eight titles. It defines mining activity as any operation carried out on deposits by means of reconnaissance, exploration, exploitation, processing, refinement, or any other mining-related activities, and deposits as naturally occurring minerals or ores that exist in economically viable quantities.

According to the law, all deposits are the property of the Kingdom, and may not be claimed by a third party through lapse of time. This includes all kinds of ores, regardless of their forms or compositions, whether they are on the surface of the earth or in its interior, and this includes the Kingdom's land territory and its maritime areas. Ownership of the minerals and ores included in the exploitation license is transferred to the licensee upon their extraction from the license site during the validity of the license.

The law specifies exceptions regarding some deposits. The provisions of the law do not apply to hydrocarbon materials, deposits, or resources, excluding coal. This comes in addition to pearls, coral, and similar marine substances. Mining activity may be carried out on the Kingdom-owned or privately owned lands, or on lands part of which is owned by the Kingdom and the other part is privately owned, or in maritime areas. Exceptions include: lands of holy sites; lands of military installations or areas reserved for hydrocarbon operations or exploration, unless a decision is issued by the competent minister to lift the restriction on them based on a request from the minister; and the lands and maritime areas that are determined by a decision of the Council of Ministers.

Mining licenses are granted according to the Mining Investment Law according to four main types that grant rights. They are:

* Reconnaissance license: Issued by the Ministry for a period not exceeding two years for the area specified by the applicant. The license may be extended or renewed for a single additional period not exceeding two years.

* Exploration license: The total term of the license is up to fifteen years, with the initial license not exceeding five years. The license may be renewed for one or multiple terms, provided that each term does not exceed five years. The person who holds an exploration license has the exclusive right to obtain an exploitation license for the relevant license site and use it under the Mining Investment Law.

* Exploitation license: The maximum licensed area allowed to be used is fifty km, and it is exploited for a maximum of sixty years (including renewal or extension). The initial period reaches thirty years and includes Class (A) and Class (B) minerals.

* Building-material quarry licenses: Construction materials are limited only to Class (C), and the initial period must not exceed ten years.

The law places a number of actions or behaviors within the scope of violations, including:

- Carrying out any mining activity without a license.

- Failure to comply with the law, regulations, or license terms and conditions.

- Providing misleading or false information to the ministry.

- Delay or failure to provide information or reports requested by the ministry.

- Default in payment of amounts due under the provisions of the law and regulations.

The delineation of these violations was accompanied by a penalty system applicable to those who perpetrate them, entailing one or multiple penalties, such as:

- A fine not exceeding SAR1 million for each violation.

- Activity suspension.

- License revocation.

- Confiscation of machinery and equipment used in the violation.

Under the law, the Ministry of Industry and Mineral Resources has the right to recover all minerals, ores, and their derivatives resulting from violating operations, or the funds derived from them, and to collect the value of the financial compensation for the ores and minerals exploited and resulting from those operations.

In 2022, a new article was added to the Mining Investment Law criminalizing the exploitation of minerals without a license. It includes penalties of imprisonment for a period not exceeding two years and a fine not exceeding SAR1 million, or one of these two penalties for anyone who exploits deposits for the purpose of selling them, or who carries out drilling work for the purpose of searching for or exploiting Class (A) minerals. The article stipulates that the maximum penalty may be doubled in the event of recommitting any of the crimes stipulated.

The decision to add this article to the law enhances efforts to reduce the phenomenon of random exploitation of mineral deposits in the Kingdom, preserve the environment, and ensure the optimal exploitation of mineral resources. The decision also supports environmental sustainability and protects neighboring communities from irregular practices that may harm the environment and surrounding communities. It also emphasizes the importance of preserving the rights of investors holding regular licenses and providing them with an appropriate and fair investment environment.

The minerals included in the decision encompass general deposits such as regular sand, gravel, fill materials, granite, and all industrial ores, in addition to gold, silver, copper, zinc, lead, iron ore, precious and semi-precious stones, and ores requiring advanced operations and concentration as classified in the regulations.

In support of the Mining Investment Law, the law's implementing regulations were issued in 2021. They include all the necessary procedures, controls, and requirements to implement the law in a way that achieves the goals of Saudi Vision 2030 and the National Industrial Development and Logistics Program (one of the vision programs).

The implementing regulations of the Mining Investment Law consist of 166 articles and seven titles. They aim to:

- Strengthen the principles of mining investment governance.

- Identify mechanisms that enhance responsibility, efficiency, effectiveness, and responsiveness to implementing the law.

- Establish clear licensing procedures based on fairness and transparency to build confidence in decision-making and enhance the stability required to develop mineral deposits to achieve benefits.

- Ensure the efficiency of operations conducted in mining activities.

- Establish effective mechanisms for resolving disputes.